June 2014

06/30/2014

“Now, all of a sudden, sometime without much or any warning, it's all thrust onto her plate. It's quite an adjustment for many women, and can be overwhelming at first. Over time, of course, many women become very adept at handling their affairs, which is really inspiring to see."

After a divorce or death of a husband, a woman often faces some challenges in regards to managing finances if she's never had that role in the past. Where do you even start?

That's the question that a recent MarketWatch article asks. The article, titled "Women in transition: Where do I start?" acknowledged that women in transition usually face different challenges than men.

Some men are new to maintaining a household; likewise, some women are new to handling issues outside the house. These can include investments, taxes and legal matters. It can be a drastic change for many women and can be overwhelming.

With that in mind, the original article sets out four initial steps to consider:

Resist the temptation to conquer the world right away: You do not need to. Start with an experienced estate planning attorney.

Get a trusted adviser: A trusted adviser could very well be an estate planning attorney. You want someone who is well-qualified, well-networked and trustworthy. They may not have all the answers, but they can refer you to other quality professionals who do.

Build a team of advisers: Ask the trusted adviser to help you build a team of professionals around you. The team will eventually expand and might add insurance, banking, wellness and other professionals.

Develop a plan of action: While you may have to handle some matters initially, it is best to work from an action plan rather than react hastily with random, knee-jerk decisions. Let your estate planning attorney guide you in the development of the plan. Grab the initiative and learn what you need to know so you can empower yourself going forward.

Transition is not easy, but it can be a gratifying growth experience. You may even find strengths and capabilities you didn't think you possessed.

“Now, all of a sudden, sometime without much or any warning, it's all thrust onto her plate. It's quite an adjustment for many women, and can be overwhelming at first. Over time, of course, many women become very adept at handling their affairs, which is really inspiring to see."

After a divorce or death of a husband, a woman often faces some challenges in regards to managing finances if she's never had that role in the past. Where do you even start?

That's the question that a recent MarketWatch article asks. The article, titled "Women in transition: Where do I start?" acknowledged that women in transition usually face different challenges than men.

Some men are new to maintaining a household; likewise, some women are new to handling issues outside the house. These can include investments, taxes and legal matters. It can be a drastic change for many women and can be overwhelming.

With that in mind, the original article sets out four initial steps to consider:

Resist the temptation to conquer the world right away: You do not need to. Start with an experienced estate planning attorney.

Get a trusted adviser: A trusted adviser could very well be an estate planning attorney. You want someone who is well-qualified, well-networked and trustworthy. They may not have all the answers, but they can refer you to other quality professionals who do.

Build a team of advisers: Ask the trusted adviser to help you build a team of professionals around you. The team will eventually expand and might add insurance, banking, wellness and other professionals.

Develop a plan of action: While you may have to handle some matters initially, it is best to work from an action plan rather than react hastily with random, knee-jerk decisions. Let your estate planning attorney guide you in the development of the plan. Grab the initiative and learn what you need to know so you can empower yourself going forward.

Transition is not easy, but it can be a gratifying growth experience. You may even find strengths and capabilities you didn't think you possessed.

06/27/2014

The last big M&A wave happened in the early 2000s, according to Ward. A very active M&A period is usually accompanied by a lot of debate, both within families, and at the policy level, about the pros and cons of having families or professional investors control businesses.

Your business is likely an inherent part of your life. The decision to part ways with your business is complicated. It can't be easy to hand over your life's work. Nevertheless, there comes a time when it’s worth selling the business and also a time when the market is right. The M&A market is heating up, so is the time right for you too?

As a business owner it’s important to think of the business as a business and (again) maybe your life’s work. On the other hand, it is also just as important to think of it as a marketable asset when it comes time to exit. After all, the business is likely to be your greatest asset and the cornerstone to your retirement, in one form or another. In addition, your business likely is part of your legacy to your children, whether as a family business succeeded into or as wealth transferred.

How will you choose to exit and when? How does this fit into your overall plan? Whether you pull the trigger or not, it’s worth watching the M&A market and ensuring that the business is appropriately structured for sale or succession.

06/26/2014

While 19 states recognized same-sex unions, as of the end of May 2014, 31 still didn’t. The rift means that couples must take special precautions to have the right estate and emergency-health care legal documents in place – and often on hand.

Whether already married or planning to tie the knot soon, same-sex couples need to make sure they have reviewed where they stand on several issues. There are a few "must-dos" that need to be addressed financially, as pointed out in a recent Investopedia article titled "Must-Do Financial Moves For Same-Sex Marriages."

The IRS made it clear only weeks after the Supreme Court decision came down: On a federal level, same-sex marriages now get the tax benefits and, in many cases, the biggest headaches that come with tying the knot. The good news is that same-sex couples now enjoy many of the privileges that were previously out of reach. They include:

Employee benefits, such as employee health insurance, can be shared tax-free and are no longer treated as taxable compensation;

It’s now possible to use one spouse’s loss—investments, income or others—to offset the other spouse’s gains;

Couples with a large gap in incomes—when one spouse stays home to tend to children while the other works—can also potentially lock in a lower tax rate on a joint return (the “marriage benefit”); and

Federal estate taxes no longer apply to assets that pass to one spouse when the other dies, up to a threshold of just over $5 million.

The change also makes it possible to file amended forms for up to three years back to claim refunds, Investopedia notes. You may now be eligible for taxes you paid for health coverage or marriage benefit breaks you previously missed out on, if you were married and based upon on how you filed. You may also have grounds to file for a refund on federal estate taxes you paid on what you inherited from your same-sex spouse—provided you were married.

These new guidelines mean you may find yourself experiencing the marriage penalty, especially if both earn high incomes. In addition, if you live in a state that doesn’t recognize your marriage and whose taxes do not conform to federal guidelines, you may have to file your federal return under one status and your state return under another. To be sure, ask your estate planning attorney to review your estate and health crisis documents. You may need to draw up an entirely new set of legal documents.

06/25/2014

Around 60 percent of those surveyed described themselves as “terrified” of what health care costs could potentially do to their retirement plans. But one thing they did not do was turn to their financial advisors for help with this issue. In fact, a solid majority - 59 percent – of the respondents said that most financial advisors are “not equipped” to discuss retirement health care costs with their clients.

Retirement is an important part of estate planning. The trick is knowing how much you'll need to save. This is no easy task, especially with so many uncertainties in the later years.

As reported in a recent article titled "Overcoming retirement fears" in LifeHealthPro, Legg Mason surveyed 500 affluent investors (those with at least $200,000 in investable assets) and found that 88% were confident that their money would fund their retirement comfortably. Nonetheless, they still had some doubts about retirement. According to the survey, the concerns included:

1. Having a catastrophic event that uses up my retirement funds;

2. Living longer than my retirement funds last;

3. Government not following up on obligations;

4. Not saving enough for my retirement; and

5. Low interest rate environment.

The biggest concern appears to be a devastating illness, which would be the type of “catastrophic event” as mentioned above. Another survey of high-net-worth individuals (defined as those with at least $250,000 in household assets), conducted annually by Nationwide Financial, revealed that roughly 60% of those surveyed described themselves as “terrified” of how future health care costs could potentially impact their retirement plans.

Don't be terrified. Speak with an estate planning attorney and get some peace of mind about the future.

06/24/2014

Sometimes having a plan that isn’t current is worse than not having a plan at all.

Have you checked in on your estate plan recently?

The wrong executors or trustees can wreak havoc on even the best estate plan. Those whom you designate to act for you under either a financial or medical power of attorney also are critical choices. Review the choices in your plan.

This is particularly important if it's been a while since you've reviewed your estate plan. The executor, trustee, and agents are the keys to ensuring your plan is implemented as you intended, as reported in a recent Investing Daily article titled "Knowing When to Update Your Plan." Keep in touch with these individuals, and if you need to make a change, talk with your estate planning attorney.

Major changes in your life are the biggest motivator for a visit to your estate planning attorney. This can include marriage, divorce, the addition of a child, or if children are now adults. A grandchild or changes in your health or the health of a loved one also might necessitate some changes in your plan. A change in net worth or the sale of a business or investment real estate might also alter your strategies.

The original article also asks, "Where are you spending time?" That's because every state has its own laws governing estates, trusts, property ownership, and powers of attorney. Typically the state where you are considered to be a resident or domicile is the state where your estate will be probated—this governs your trusts and financial power of attorney.

A medical power of attorney and related documents must be valid in the state you’re physically in when medical care is needed. Your estate planning attorney should be aware if you moved or are spending more time out of state than you used to (such as a winter or summer home). Discuss this with your attorney, and he or she will determine which state is considered your current legal residence.

Real estate is subject to probate and related laws in the state in which it is located, regardless of where the owner lives. Some other property also might fall under the laws of another state instead of your home state. If you bought property in another state, your estate will have to go through probate in at least two states. There are ways to avoid this expensive situation.

The article suggests that if your plan is more than five years old, you probably should touch base with your estate planning attorney.

06/23/2014

Since for most of us, our children are our foremost priority in life, a Letter of Intent can be a crucial document. And anyone who wants to ensure special care for their children should consider including one with their estate documents; there are no real drawbacks to writing one.

For parents, their children are the most important part of their lives. With that in mind, a Letter of Intent can be a very important document to ensure special care for your children. This estate planning "blueprint" was recently discussed in a LifeHealthPro article titled "Letter of intent: a useful component of an estate plan." Including such a letter as part of your estate documents can prove to be very beneficial.

The article advises that there's no drawback to writing one either. However, there are a few things to keep in mind.

Far from being a “silver bullet” for all of your estate planning “must-haves,” there are some things that a Letter of Intent can't do. For example, a Letter of Intent is really a "blueprint" for other estate planning documents. You can use the Letter of Intent to provide detailed instructions and preferences for the care of your child, and those wishes can then be reflected in your wills or a trust to guarantee that they’re carried out. Financial decisions should be a reflection of your vision of the child's care—not vice versa.

Another thing to note is that the letter can be drafted right now, regardless of where you and your child are in life. "It’s not just that you never know when disaster will strike, although that’s always a good reason to be prepared," the article says. Understanding a child—especially one with special needs—is a lifelong journey. Start the letter now and add to it as the years go on.

Get your child involved, as it is his or her life, and he or she should have a voice. The LifeHealthPro article confirms that the child will appreciate being permitted to be a part of the important decisions about his or her future.

One last thing to remember: this is your opportunity to record everything about your child.A Letter of Intent can do this and more—it can let others know about his or her personality, likes, dislikes, strengths, and weaknesses. This will be critical information for those individuals whom you entrust to potentially have an important role in the care of your child.

06/20/2014

"We say to people: 'If you do nothing, your money will go to the state. Is that what you want?' That's enough to make them want to consider something else," says Andrew Russell, a certified financial planner in San Diego.

If you have an estate to leave behind when you pass away, but no heirs to leave it to ... where should your money go?

A recent Reuters article, titled "Estate planning for the young, rich and childless," reports that there are 17 million unmarried Americans over age 65 who are readying for retirement and that charitable foundations and financial advisers report that a growing number of young people now have these same decisions to make before they marry or have children. This is especially true, the article says, for tech entrepreneurs who can see a large amount of money from stock options or the sale of a start-up business.

When it comes to charitable planning, financial experts say it's not about how old you are but how rich. If you have saved more than $100,000, you do not want to die without a will or estate plan—this can leave the distribution of your assets up to a court-appointed executor and state law. If you do nothing, your money may go to the state. Is that what you want?

You also need to prepare healthcare directives and determine who should manage your affairs should you become incapacitated in the event of an accident or illness. What usually prevents individuals, with or without children, from estate planning is that they don't want to face their mortality.

The article suggests considering establishing a donor-advised fund, which operates similar to mutual funds designated for charitable giving. The funds allow an individual to make a one-time or ongoing contribution through the donor-advised fund, which reduces fees and paperwork. Donors can designate the funds to one or more charities.

06/19/2014

Many people spend years planning for retirement and think they have it all figured out, until they actually retire.

Think you got your retirement all figured out? Just to be sure, review these retirement myths to get the real deal on your golden years.

You'll probably retire earlier than expected. Although this sounds like a dream, it usually isn't. It's important to be aware of variables such as the size of your retirement nest egg and how many years you'll be saving before withdrawals start. The Wall Street Journal reported in a recent article titled "Five Myths About Retirement" that about 22% of workers say they expect to wait until age 70 to retire, but only 9% of retirees actually retired at that age.

It's not easy to get back into the workplace. Retirees may find it difficult to find new work. About two-thirds of retirees say they plan to work in retirement, but just 27% report actually doing so. Much of this drop-off is the same reason it's more difficult for older workers to find jobs in general. This forced unemployment typically means they will try to find jobs with the same job skills. However, these retirees can't compete with younger and more socially savvy job seekers. Further, employers aren't eager to 'pay the price' for the experience these days. The article also notes that for some the very health issues that prompted early retirement in the first place limit their ability to work.

You'll regret buying that second home. A dream of some retirees is to buy a second home to live in part-time, and eventually sell their primary home. The advice from advisers is "Don't do it." They can be expensive, a hassle, and a mistake, the article says. Who needs the hassle of frozen pipes, neighbor disputes and volatile housing values? This issue is even greater as retirees age and become less able to take care of one house, let alone a second.

Medicare doesn't cover what you think it does. Health costs are a major issue for just about every retiree, but many individuals assume quite incorrectly that once over 65, Medicare will take care of everything. This is so not true. Traditional Medicare covers only about 48% of an enrollee's health costs on average. There are routine costs Medicare usually will not cover, such as eyeglasses, hearing aids, and dental care. Retirees are still required to pay deductibles, which can add up with any chronic or serious illness. The biggest problem: Medicare doesn't cover the cost of a long-term care facility or of home health-care aides. According to the article's sources, the average Medigap premium was $2,200 a year in 2010. However, premiums vary by age. For example, at 80, beneficiaries paid 52% more than 65 year-olds. Medigap policies won't cover nursing home care.

Your budget is unrealistic. A critical element of retirement planning is determining how much money you'll need to keep a comfortable standard of living. Many retirees assume that they'll spend less after they stop working. The article cautions that while lower taxes and the end of retirement account contributions will typically lower income needs, retirees don't account for the general rise in out-of-pocket spending.

This article will give you a lot to think about. Read it carefully, then speak to your estate planning attorney and work on strategies that are best tailored for your situation.

06/18/2014

A general rule is that Roth IRAs are good accounts to leave to loved ones. Distributions typically are tax-free, and if your heirs follow the rules, they can stretch distributions from a Roth over their lifetimes, allowing the bulk of the investment to continue growing tax-free.

"The Roth IRA is pretty much the Cadillac of accounts for them to inherit," says Aaron Thiel, a wealth planner with PNC Wealth Management in Sarasota, Fla.

Out of all the different types of retirement accounts, which is the best to leave to your loved ones? For many, the Roth IRA rises above the rest.

"The Roth IRA is pretty much the Cadillac of accounts to inherit," according to The Wall Street Journal in recent article titled "The Most Valuable Assets to Leave for Your Heirs." That statement works especially well for individuals with the federal estate-tax exemption in excess of $10.6 million for a married couple. With the estate exemption being so high, the article says the majority of Roth IRAs will be estate-tax-free and income-tax-free.

The WSJ article notes that some investment advisors advocate converting all or part of a traditional retirement account to a Roth simply to benefit your heirs if you don't need the money for living expenses. However, you also need to consider your own cash needs and possible tax law changes. Withdrawing a sizeable sum of money in the years immediately following conversion extends the length of time it takes to reach the break-even point. This is the point when the big upfront tax bill you pay at conversion is outweighed by the benefit of the money growing tax-free in the Roth. The cost-benefit analysis of converting a Roth depends on the expected rates of return, withdrawal rate, and other factors. These factors include how the IRA income from the conversion may affect your tax bracket and the taxation of Social Security benefits.

The article warns that the rules for inherited IRAs might change. Presently, beneficiaries of inherited IRAs must start distributions, but have the option of spreading those payments out over their expected life spans. Legislation has been proposed to get rid of this option and mandate full disbursement over a period of five years, for example.

There are numerous strategies for leaving assets to heirs, the article states. It suggests that you do your research and consider hiring an estate-planning attorney to help you assess your options. Also, the article suggests that you speak with your heirs about your plans.